Stock Exchanges

The PRC operates 4 stock exchanges: Shanghai (1990), Shenzhen (1991) and Hong Kong (1891), as well as four commodity & futures exchanges.

The Shanghai and Shenzhen bourses
can offer two kinds of share:

A-Shares are only available to Chinese citizens and are traded in Chinese Yuan. The first was issued in 1984. (Since November 2002, a limited number of foreign investors are able to buy A-shares under the QFII program – see below).
B-Shares are available to foreign investors and trade in US dollars in Shanghai or HK dollars in Shenzhen.

The Shanghai exchange is currently focused on the bond market. In 2009, it expects to list the NYSE, to launch its International Board to approve the listing of non-Chinese companies, and to open a B board for companies with smaller market capitalisations. They have already received 20,000 applications, of which only 300 a year will be accepted. In 2001, the bourse plans to introduce derivatives and single stock trading.

The Hong Kong bourse
is one of the world’s largest stock exchanges with over 1200 listings and a total market capitalisation of US$2.3 trillion. 90% of companies on the Hong Kong stock exchange are incorporated in an OFC. 41% of the Hong Kong stock exchange is non-Hong Kong companies, of which 27% are from the UK and 8% are from the PRC. The PRC companies on the Hong Kong bourse offer two kinds of share:

H-shares are denominated in Hong Kong dollars and are offered by companies incorporated in the mainland but listed in Hong Kong (or on other overseas boards)
Red chip shares are offered by companies whose main business is in China but which incorporated and listed in Hong Kong.

Because of the infancy of and lack of capacity in the stock market in China, the preference of the big 4 state-owned commercial banks for state-owned enterprises over private ones, and the 2 year waiting time due to over-subscription, PRC companies are increasingly looking to foreign exchanges.